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OBLIGATIONS AND CONTRACTS TITLE 1 - OBLIGATION Art. 1156. An obligation is a juridical necessity to give, to do or not to do. (n) neither party may unilaterally evade his obligation in the contract, unless: a. Contract authorizes it b. Other party assents Parties may freely enter into any stipulations provided they are not contrary to law, morals, good customs, public order or public policy
CHAPTER 1. GENERAL PROVISIONS See Arts. 1156 - 1162 ELEMENTS OF AN OBLIGATION: 1. Active subject (obligee/creditor): one in whose favor the obligation is constituted 2. Passive subject (obligor/debtor): one who has the duty of giving, doing or not doing 3. Object: prestation; the conduct which has to be observed by the debtor/obligor REQUISITES 1. it must be licit (otherwise it is void) 2. it must be possible, physically and juridically (otherwise it is void) 3. it must be determinate or determinable (otherwise it is void) 4. it must have pecuniary value a. Vinculum Juris: juridical/legal tie; binds the parties to the obligation b. Causa (causa debendi/causa obligationes): why obligation exists SOURCES OF OBLIGATION
QUASI-CONTRACT (OBLIGATION EX QUASICONTRACTU) Juridical relation resulting from lawful, voluntary and unilateral acts, which has for its purpose, the payment of indemnity to the end that no one shall be unjustly enriched or benefited at the expense of another. Distinguished from other Sources 1. act giving rise to a quasi contract must be LAWFUL distinguishing it from delict; 2. act must be VOLUNTARY distinguishing it from quasi-delict which is based on fault or negligence; 3. act must be UNILATERAL distinguishing it from contract which is based on agreement. (Tolentino, Volume IV, p. 68) KINDS OF QUASI-CONTRACT Negotiorum gestio: unauthorized management; arises whenever a person voluntarily takes charge of the agency or management of anothers abandoned business or property without the latters authority Solutio indebiti: undue payment. Arises when a person unduly delivers a thing through mistake to another who has no right to demand it (must not be through liberality or some other cause) DELICTS (OBLIGATION EX MALEFICIO OR EX DELICTO ) RPC: Art. 100 Every person criminally liable for a felony is also civilly liable. GOVERNING RULES 1. Articles 100-113 of the RPC and other penal laws subject to Art 2177 Civil Code (quasi-delict); 2. Chapter 2, Preliminary title, on Human Relations ( Civil Code ) 3. Title 18 of Book IV of the Civil Code on damages SCOPE OF CIVIL LIABILITY 1. Restitution
Art. 1157. Obligations arise from: (1) Law; (2) Contracts; (3) Quasi-contracts; (4) Acts or omissions punished by law; and (5) Quasi-delicts. (1089a)
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LAW (OBLIGATION EXtoLEGE) are needed see this picture. Must be expressly or impliedly set cannot be presumed
forth
and
CONTRACT (OBLIGATION EX CONTRACTU) Must be complied with in good faith it is the law between parties;
Head: Joy Ponsaran, Eleanor Mateo; Understudy: Joy Tajan, John Paul Lim; Subject Head: Jennifer Sanchez; Pledgees: Maria Angela Alarilla, Gregorio Rafael Bueta, Kristi Fe Mari Lu
WHEN OBLIGATION TO DELIVER ARISES GENERAL RULE: From the time of the perfection of the contract (i.e. meeting of the minds between the parties) EXCEPTIONS a. when the parties made a stipulation as regards the right of the creditor to the fruits of the thing b. when the obligation is subject to a suspensive condition or period; arises upon fulfillment of the condition or arrival of the period PERSONAL V. REAL RIGHT Personal Real Jus ad rem, a right Jus in re, a right enforceable only enforceable against Page 105 of 297
Right pertaining to a person over a specific thing, without a definite passive subject against whom the right may be personally enforced
Can only be dema nded if oblig ation is not very perso nal
X
3. To deliver its accessions and accessories Accessions additions to or improvements upon a thing. Ex: air conditioner in a car. Accessories things joined to, or included with the principal thing for its better use, embellishment or completion. Ex:key of a house; frame of a picture (De Leon, 2003 ed., pp. 37-38) 4. To deliver the thing itself 5. To pay damages in case of breach of the obligation by reason of delay, fraud, negligence or contravention of the tenor of the obligation. DUTIES OF DEBTOR IN AN OBLIGATION TO GIVE A GENERIC THING 1. To deliver the thing which is neither of superior nor of inferior quality 2. To pay damages in case of breach of the obligation by reason of delay, fraud, negligence or contravention of the tenor of the obligation. REMEDIES OF THE CREDITOR IN CASE OF NONPERFORMANCE (See Arts 1165 1168) 1. Specific Performance: Performance by the debtor of the prestation itself 2. Substitute Performance: someone else performs or something else is performed at the expense of debtor 3. Equivalent Performance: damages
substitute performance
rescission/ cancellation
BREACH OF OBLIGATIONS (See Arts. 1170 1174) 1. Voluntary debtor in the performance of the obligation is guilty of: fraud (Dolo) negligence (culpa) delay (mora) contravention of the tenor of the obligation NOTE: debtor is liable for damages 2. Involuntary debtor is unable to comply with his obligation due to fortuitous event/s NOTE: debtor is not liable for damages FRAUD (Dolo) It is the deliberate or intentional evasion of the normal fulfillment of an obligation. (8 Manresa 72) Oleary Macondray & Co., 45 Phil. 812 [1924[ It implies some kind of malice or dishonesty and it cannot cover cases of mistake and errors of judgment made in good faith. It is synonymous to bad faith TYPES OF FRAUD 1. Causal Fraud (Dolo Causante): fraud employed 2. in the execution of the contract 3. Incidental Fraud (Dolo Incidente): fraud in performance of obligation already existing because of a contract Page 106 of 297
Remedies
Real Obligations
Specific Gener
Personal Obligations
To do Not to do
specific performance
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Deleted: Corliss v. Manila Railroad The law presumes or requires a man to possess ordinary capacity to avoid harming his neighbors unless a clear and manifest incapacity is shown and the law does not hold him liable for unintentional injury unless, possessing such capacity, he might and ought to have foreseen the danger.
Results in vitiation of consent; voidable contract Gives rise to a right of an innocent party to annul the contract
Purpose is to secure the consent of the other party but the fraud was not the principal inducement in making the contract Does not result in the vitiation of consent Gives rise to a right of an innocent party to claim for damages
FRAUD V. NEGLIGENCE Fraud There is deliberate intention to cause damage. Liability cannot be mitigated. Waiver for future fraud is void.
Negligence There is no deliberate intention to cause damage. Liability may be mitigated. Waiver for future negligence may be allowed in certain cases
NOTE: Future fraud cannot be waived. However, the law does not prohibit renunciation of the action for damages on the ground of fraud already committed. REMEDIES OF DEFRAUDED PARTY Insist on specific performance (Art 1233) Resolve contract (Art 1191) Claim damages, in either case
KINDS OF NEGLIGENCE, DISTINGUISHED Culpa Aquiliana Culpa Contractual Negligence is Negligence merely an substantive and incident of performance independent of an obligation There may or may There is a pre-existing not be a pre-existing contractual relation contractual obligation Source of the Source of the obligation obligation is the is the breach of the negligence itself contractual obligation Negligence must be Proof of existing of the proved contract and its breach is prima facie sufficient to warrant recovery in the Diligence in the Diligence and selection and selection of the supervision of the supervision is not employees is a employees available as a defense defense EFFECTS OF CONTRIBUTORY NEGLIGENCE OF THE CREDITOR GENERAL RULE: Reduces or mitigates the damages which he can recover EXCEPTION: If the negligent act or omission of the creditor is the proximate cause of the event which led to the damage or injury complained of, he cannot recover. DELAY (MORA) 1. Ordinary Delay failure to perform an obligation on time 2. Legal Delay/ Default failure to perform an obligation on time which failure constitutes a Page 107 of 297
NEGLIGENCE Consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place.
are needed to see this picture. KINDS OF NEGLIGENCE 1. Quasi-Delict (Culpa aquiliana/culpa extra contractual)- source of obligation 2. Contractual Negligence (Culpa Contractual)negligence in the performance of a contract QuickTime and a TIFF (Uncompressed) decompressor
CESSATION OF THE EFFECTS OF MORA: renunciation (express or implied) prescription NOTE: There is no delay in negative obligations and natural obligations. FORTUITOUS EVENT An event which could not be foreseen, or which though foreseen, was inevitable Page 108 of 297
Art. 1178 Subject to the laws, all rights acquired in virtue of an obligation are transmissible, if there has been no stipulation to the contrary. (1112) Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law. (1124) Art. 1192. In case both parties have committed a breach of the obligation, the liability of the first infractor shall be equitably tempered by the courts. If it cannot be determined which of the parties first violated the contract, the same shall be deemed extinguished, and each shall bear his own damages. (n) REMEDIES AVAILABLE TO CREDITORS FOR THE SATISFACTION OF THEIR CLAIMS 1. Exact fulfillment of the obligation by specific or substitute performance with a right to damages in either case; 2. In case of reciprocal obligations, petition the court to resolve the contract; 3. Pursue the leviable (not exempt from attachment under the law) property of the debtor; 4. Accion directa (Arts. 1729 and 1652):Right of the lessor to go directly to sublessee for unpaid rents of the lessee. Right of the laborers or persons who furnish materials for a piece of work undertaken by a contractor to go directly to the owner for any unpaid claims due to the contractor 5. Accion subrogatoria to be subrogated to all the rights and actions of the debtor save those which are inherent in his person REQUISITES: a. The debtor to whom the right of action properly pertains must be indebted to the creditor; b. The creditor must be prejudiced by the inaction or failure of the debtor to proceed against the third person; c. The creditor must have pursued first or exhausted all the properties of the debtor which are not exempt from execution; d. The debtor's assets are insufficient to satisfy his claims; and Page 109 of 297
PRINCIPLE IN ARTICLE 1176 Before the presumption that a prior installment had been paid may arise, the receipt must specify the installment for which payment is made. QuickTime and a
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Art. 1177 The creditors, after having pursued the property in possession of the debtor to satisfy their claims, may exercise all rights and bring all the actions of the latter for the same purpose, save those which are inherent in his person; they may also impugn the acts which the debtor may have done to defraud them. (1111)
fulfillment of a condition or upon the expiration of a period and is demandable at once CONDITIONAL one whose effectivity is subordinated to the fulfillment or non-fulfillment of a future AND uncertain event or upon a past event unknown to the parties CONDITION - Future and uncertain event or a past event unknown to the parties 1. Suspensive happening of condition gives rise to obligation Effects: a. Effectivity retroacts to the day of the constitution of the obligation b. No retroactivity with reference to fruits or interest and prescription c. Creditor may preserve rights d. Debtor recovery of payment by mistake or even w/o mistake RULES ON LOSS, DETERIORATION, AND IMPROVEMENTS DURING PENDENCY OF A SUSPENSIVE CONDITION (Art. 1189)
Loss Deterioration
CHAPTER 3. - DIFFERENT KINDS OF OBLIGATIONS See Arts. 1179 - 1230 PRIMARY CLASSIFICATION OF OBLIGATIONS UNDER THE CIVIL CODE 1. Demandability a. pure, b. conditional c. with a period 2. Plurality of object a. simple b. alternative c. facultative 3. Plurality of subject a. Simple b. Joint c. solidary 4. Performance a. Divisible b. indivisible 5. Sanctions for breach QuickTime and a TIFF (Uncompressed) a. with a penal clause decompressor are needed to see this picture. b. without a penal clause PURE AND CONDITIONAL OBLIGATIONS (See Arts. 1179 1190) PURE one whose effectivity or extinguishment does not depend upon the fulfillment or non-
Improvement
REQUISITES FOR THE APPLICATION OF ARTICLE 1189 a. 1.The obligation must be a real obligation b. 2.The object is a specific or determinate thing c. The obligation is subject to a suspensive condition d. The condition is fulfilled e. There is loss, deterioration or improvement of the thing during the pendency of the happening of the condition 2. Resolutory happening of condition extinguishes obligation EFFECTS: a. No retroactive effect b. Obligation extinguished c. Restore to each other what was received plus interest/fruits 3. Potestative dependent on sole will of 1 party; if on part of debtor and suspensive void 4. Casual dependent on chance or hazard 5. Mixed chance, or any of parties 6. With term Page 110 of 297
the
OBLIGATIONS WITH A PERIOD WITH A PERIOD An obligation which depends on a future and certain event (See Arts 1193, 1196) WHEN STIPULATION SAYS PAYABLE WHEN ABLE IT IS WITH A PERIOD, REMEDY: 1. Agreement among parties 2. Court shall fix period of payment when parties unable to agree KINDS: 1. Resolutory ( in diem ) demandable at once but terminates upon arrival of the day certain Day certain that which must necessarily come, although it may not be known when 2. Suspensive ( ex die ) obligation becomes demandable on the day stipulated
WHEN COURTS MAY FIX PERIOD: 1. If the obligation does not fix a period, but from its nature and circumstances it can be inferred that a period was intended by the parties 2. If the duration of the period depends upon the will of the debtor 3. In case of reciprocal obligations, when there is a just cause for fixing a period 4. If the debtor binds himself when his means permit him to do so PERIOD FOR WHOSE BENEFIT GENERAL RULE: When a period is designated for the performance or fulfillment of an obligation, it is presumed to have been established for the benefit of both creditor and debtor. EXCEPTION: When it appears from the tenor of the obligation or other circumstances that the period has been established in favor of one or the other. PERIOD FOR THE BENEFIT OF THE CREDITOR Creditor may demand the fulfillment of the obligation at any time but the debtor cannot compel him to accept before the expiration of the period PERIOD FOR THE BENEFIT OF THE DEBTOR Debtor may oppose any premature demand of the creditor but he may renounce the benefit of the period by performing his obligation in advance (Manresa) WHEN DEBTOR LOSES RIGHT TO PERIOD: Insolvency of debtor, unless security provided Did not deliver security promised Impaired security through his own acts or through fortuitous event unless he gives new securities equally satisfactory Violates undertaking in consideration of extension of period Attempts to abscond
Time w/c must necessarily come although it may not be known when QuickTime and aan influence upon Exerts Exerts an influence TIFF (Uncompressed) decompressor are needed to see this picture. upon the time of the very existence of the demandability or obligation itself extinguishment of an obligation Does not have any Has retroactive effect retroactive effect unless there is an agreement to the
CONDITION Fact or event which is future or uncertain or a past event unknown to the parties Future and uncertain fact or event which may or may not happen
JOINT AND SOLIDARY OBLIGATIONS (See Arts. 1207 1222) JOINT presumption when two or more creditors or two or more debtors concur in one and the same obligation
EXCEPTIONS TO THE PRESUMPTION 1. when expressly stated that there is solidarity 2. when the law requires solidarity 3. when the nature of the obligation requires solidarity 4. when a charge or condition is imposed upon heirs or legatees and the testament expressly makes the charge or condition in solidum (Manresa) Page 112 of 297
SOLIDARY must be expressed in stipulation or provided by law or by nature of obligation 1. Active on the part of creditor or oblige EFFECTS: Death of 1 solidary creditor transmits share to heirs (but collectively) Each creditor represents the other in the act of recovery of payment Credit is divided equally between creditors as among themselves Debtor may pay any of the solidary creditors 2. Passive on the part of debtors or obligors EFFECTS: Each debtor may be requested to pay whole obligation with right to recover from codebtors Interruption of prescription to one creditor affects all Interest from delay on 1 debtor is borne by all 3. Mixed on the part of the obligors and obligees, or the part of the debtors and the creditors 4. Conventional agreed upon by the parties 5. Legal imposed by law Instances where law imposes solidary obligation: a. Obligations arising from tort b. Obligations arising from quasi-contracts c. Legal provisions regarding obligation of devisees and legatees d. Liability of principals, accomplices, and accessories of a felony e. Bailees in commodatum EFFECTS: a. Payment made before debt is due, no interest can be charged, otherwise interest can be charged b. Insolvency of one others are liable for share pro-rata c. If different terms and conditions collect only what is due, later on collect from any d. No reimbursement if payment is made after prescription or became illegal e. Remission made after payment is made codebtor still entitled to reimbursement f. Effect of insolvency or death of co-debtor still liable for whole amount g. Fault of any debtor every one is responsible price, damage and interest Page 113 of 297
INDIVISIBLE performance
To give definite things Not susceptible of partial performance Provided by law Intention of parties
OBLIGATIONS WITH A PENAL CLAUSE (See Arts. 1226 1230) WITH PENAL CLAUSE One to which an accessory undertaking is attached for the purpose of insuring its performance by virtue of which the obligor is bound to pay a stipulated indemnity or perform a stipulated prestation in case of breach CHARACTERISTICS OF PENAL CLAUSES: 1. Subsidiary - As a general rule, only penalty can be demanded, principal cannot be demanded, except: Penalty is joint or cumulative 2. Exclusive - takes place of damage, damage can only be demandedQuickTime in the ff. andcases: a TIFF (Uncompressed) decompressor a. Stipulation granting are needed to see this right picture. b. Refusal to pay penalty c. With dolo ( not of creditor ) CAUSES FOR REDUCTION OF PENALTY: 1. Partial/irregular performance 2. Penalty provided is iniquitous/ unconscionable
Art. 1235. When the obligee accepts the performance, knowing its incompleteness or irregularity, and without expressing any protest or objection, the obligation is deemed fully complied with. (n) Attempt in Good Faith to perform without willful or intentional departure Deviation is slight Omission/Defect is technical or unimportant Must not be so material that intention of parties is not attained
EFFECT OF SUBSTANTIAL PERFORMANCE IN GOOD FAITH Obligor may recover as though there has been strict and complete fulfillment, less damages suffered by the oblige Right to rescind cannot be used for slight breach SPECIAL RULES/FORMS OF PAYMENT 1. APPLICATION OF PAYMENTS the designation of the debt which payment shall be made, out of 2 or more debts owing the same creditor: stipulation or application of party given benefit of period OK; to be valid: must be debtors choice or w/ consent of debtor REQUISITES FOR THE APPLICATION OF PAYMENT: a. Various debts of the same kind b. Same debtor c. Same creditor d. All debts must be due EXCEPTION: there may be application of payment even if all debts are not yet due if: a. Parties so stipulate b. When application of payment is made by the party for whose benefit the term has been constituted c. Payment is not enough to extinguish all debts HOW APPLICATION IS MADE: a. Debtor makes the designation b. If not, creditor makes it by so stating in the receipt that he issues unless there is cause for invalidating the contract c. If neither the debtor nor creditor has made the application or if the application is not valid, then application, is made by operation of law
WHERE PAYMENT SHOULD BE MADE 1. In the place designated in the obligation 2. If there is no express stipulation and the undertaking is to deliver a specific thing at the place where the thing might be at the moment the obligation was constituted 3. In other case in the place of the domicile of the debtor Time of payment - time stipulated Effect of payment extinguish obligation Except: order to retain debt SUBSTANTIAL PERFORMANCE
QuickTime and a understood to have Art. 1233. A debt shall not be TIFF (Uncompressed) decompressor needed to see this picture. been paid unlessarethe thing or service in which the obligation consists has been completely delivered or rendered, as the case may be. (1157)
Art. 1234. If the obligation has been substantially performed in good faith, the obligor may recover as though there had been a strict and complete fulfillment, less damages suffered by the obligee. (n)
2. DACION EN PAGO DACION EN PAGO mode of extinguishing an obligation whereby the debtor alienates in favor of the creditor property for the satisfaction of monetary debt; extinguish up to amount of property unless w/ contrary stipulation; A special form of payment because 1 element of payment is missing: IDENTITY CONDITIONS FOR A VALID DACION: a. If creditor consents, for a sale presupposes the consent of both partie b. If dacion will not prejudice the other creditors c. If debtor is not judicially declared insolvent NOTE: DACION is governed by the law on sales 4. CESSION or ASSIGNMENT CESSION/ASSIGNMENT IN FAVOR OF CREDITORS the process by which debtor transfer all the properties not subject to execution in favor of creditors is that the latter may sell them and thus, apply the proceeds to their credits; extinguish up to amount of net proceeds ( unless w/ contrary stipulation )
4. CONSIGNATION TENDER -the act of offering the creditor what is due him together with a demand that the creditor accept the same (When creditor refuses w/o just cause to accept payment, he becomes in mora accepiendi and debtor is released from responsibility if he consigns the thing or sum due) CONSIGNATION the act of depositing the thing due with the court or judicial authorities whenever the creditor cannot accept or refuses to accept payment; generally requires prior tender of payment REQUISITES OF VALID CONSIGNATION: a. Existence of valid debt b. Consignation was made because of some legal cause - previous valid tender was Page 116 of 297
KINDS OF ASSIGNMENT: a. Legal governed by the insolvency law b. Voluntary agreement of creditors REQUISITES OF VOLUNTARY ASSIGNMENT: a. More than one debt b. More than one creditor c. Complete or partial insolvency of debtor
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WHEN THING IS LOST IN THE POSSESSION OF THE DEBTOR Presumption: Loss due to debtors fault (disputable) Exception: natural calamity, earthquake, flood, storm 5. REBUS SIC STANTIBUS REBUS SIC STANTIBUS - agreement is valid only if the same conditions prevailing at time of contracting continue to exist at the time of performance; Obligor may be released in whole or in part based on this ground. REQUISITES a. The event or change could not have been foreseen at the time of the execution of the contract b. The performance is extremely difficult, but not impossible (because if it is impossible, it is extinguished by impossibility) c. The event was not due to the act of any of the parties d. The contract is for a future prestation 6. CONDONATION Page 117 of 297
REQUISITES: a. It must take place between principal debtor and principal creditor only b. Merger must be clear and definite c. The obligation involved must be same and identical one obligation only d. Revocable, if reason for confusion ceases, the obligation is revived 7. COMPENSATION
COMPENSATION Set off; it is a mode of extinguishment to the concurrent amount the obligation of persons who are in their own right reciprocally debtors or creditors REQUISITES: a. Both parties must be mutually creditors and debtors - in their own right and as principals b. Both debts must consist in sum of money or if consumable , of the same kind or quality c. Both debts are due d. Both debts are liquidated and demandable (determined) e. Neither debt must be retained in a rd controversy commenced by 3 person and communicated w/ debtor (neither debt is garnished) KINDS OF COMPENSATION a. Legal by operation of law; as long as 5 requisites concur- even if unknown to parties and if payable in diff places; indemnity for expense of exchanges; even if not equal debts only up to concurring amount b. Conventional agreement of parties is enough, forget other requirement as long as both consented c. Facultative one party has choice of claiming/opposing one who has benefit of period may choose to compensate: i. Not all requisites are present ii. Depositum; commodatum; criminal offense; claim for future support; taxes
Extent: a. total
Kinds: a. Principal accessory also condoned b. accessory principal still outstanding c. accessory obligation of pledge condoned; presumption only, rebuttable
b. partial
REQUISITES OF IMPLIED CONDONATION 1. Voluntary delivery presumption; when evidence of indebtedness is w/ debtor presumed voluntarily delivery by creditor; rebuttable 2. Effect of deliveryQuickTime of evidence of indebtedness and a d) decompressor TIFF (Uncompresse is conclusion that debt is are needed to see this picture. condoned already conclusion; voluntary delivery of private document a. If in hands of joint debtor only his share is condoned b. If in hands of solidary debtor - whole debt is condoned c. Tacit voluntary destruction of instrument by creditor; made to prescribe w/o demanding
NOVATION extinguishment of obligation by creating/ substituting a new one in its place Changing object or principal conditions Substituting person of debtor rd Subrogating 3 person in right of creditor
REQUISITES: a. Valid obligation b. Intent to extinguish old obligation expressed or implied: completely/substantially incompatible old and new obligation on every point c. Capacity and consent of parties to the new obligation d. Valid new obligation EFFECTS OF NOVATION: a. Extinguishment of principal carries QuickTime and a accessory, except: TIFF (Uncompressed) decompressor are needed to see this picture. i. Stipulation to contrary ii. Stipulation pour autrui unless beneficiary consents iii. Modificatory novation only; obliged to w/c is less onerous iv. Old obligation is void
b.
c.
Creditor pays another preferred creditor even w/o debtors knowledge rd 3 person not interested in obligation pays w/ approval of debtor Person interested in fulfillment of obligation pays debt even w/o knowledge of debtor Change of debtor
4. 5. 6.
Fulfill what has been expressly stipulated All consequences w/c may be in keeping with good faith, usage and law Relativity binding only between the parties, their assigns, heirs; strangers cannot demand enforcement
EXCEPTION TO RELATIVITY: 1. Accion pauliana 2. Accion directa 3. Stipulation pour autrui REQUISITES OF STIPULATION POUR AUTRUI 1. Parties must have clearly and deliberately conferred a favor upon a 3rd person 2. The stipulation in favor of a 3rd person should be a part of, not the whole contract 3. That the favorable stipulation should not be conditioned or compensated by any kind of obligation whatsoever 4. Neither of the contracting parties bears the legal rd representation or authorization of 3 party 5. The third person communicates his acceptance before revocation by the original parties 6. Art 1312; Art 1314 REQUISITES OF ART 1312: 1. Existence of a valid contract 2. Knowledge of the contract by a 3rd person rd 3. Interference by the 3 person KINDS OF CONTRACTS 1. As to perfection or formation a. Consensual perfected by agreement of parties b. Real perfected by delivery ( commodatum, pledge, deposit ) c. Formal/solemn perfected by conformity to essential formalities (donation ) 2. As to cause a. Onerous with valuable consideration b. Gratuitous founded on liberality c. Remunerative prestation is given for service previously rendered not as obligation 3. As to importance or dependence of one upon another a. Principal contract may stand alone b. Accessory depends on another contract for its existence; may not exist on its own c. Preparatory not an end by itself; a means through which future contracts may be made 4. As to parties obliged a. Unilateral only one of the parties has an obligations Page 120 of 297
1. debtor is released
2. needs consent of creditor express or implied 3. two obligations; one is extinguished and new one created 4. new debtor is obliged to pay
CONVENTIONAL SUBROGATION
governed by Arts. 1300-1304 debtors consent is required extinguishes the obligation and gives rise to a new one defects and vices in the old obligation are cured takes effect upon moment of novation or subrogation
ASSIGNMENT OF RIGHTS
governed by Arts. 1624 to 1627 debtors consent is not required transmission of right of the creditor to third person without modifying or extinguishing the obligation defects and vices in the old obligation and not cured as far as the debtor is concerned, takes effect upon notification
TITLE II C O N T R A C T S CHAPTER 1. GENERAL PROVISIONS See Arts. 1305 -a1317 QuickTime and
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PRINCIPAL CHARACTERISTICS: 1. Autonomy of wills parties may stipulate anything as long as not illegal, immoral, etc. 2. Mutuality performance or validity binds both parties; not left to will of one of parties 3. Obligatory Force parties are bound from perfection of contract:
*In the Sia Suan v Alcantara case, there is a strong dissent by J.Padilla to the effect that the minor cannot be estopped if he is too young to give consent; one that is too young to give consent is too young to be estopped. Subsequently, in Braganza v Villa-Abrille, the dissent became the ruling. Minors could not be estopped. DISQUALIFIED TO ENTER INTO CONTRACTS: (contracts entered into are void) 1. Those under civil interdiction 2. Hospitalized lepers 3. Prodigals 4. Deaf and dumb who are unable to read and write 5. Those who by reason of age, disease, weak mind and other similar causes, cannot without outside aid, take care of themselves and manage their property, becoming an easy prey for deceit and exploitation Incapacity Restrains the exercise of the right to contract May still enter into contract through parent, guardian or legal represemtative Based upon subjective circumstance of certain person Contracts entered into are merely voidable Disqualification Restrains the very right itself Absolutely disqualified
*Ang Yu v. CA (1994) states that a unilateral promise to buy or sell, if not supported by a distinct consideration, may be withdrawn but may not be done whimsically or arbitrarily; the right of the grantee here is damages and not specific performance; Equatorial v. Mayfair(264 SCRA 483) held that an option clause in order to be valid and enforceable must indicate the definite price at which the person granting the option is willing to sell, contract can be enforced and not only damages; Paranaque Kings V CA (1997) states that right of PERSONS WHO CANNOT GIVE CONSENT TO A CONTRACT: 1. Minors 2. Insane or demented persons 3. Illiterates/ deaf-mutes who do not know how to write 4. Intoxicated and under hypnotic spell 5. Art 1331 - person under mistake; mistake may deprive intelligence 6. Art 1338 - person induced by fraud (dolo causante) NOTE: Dolus bonus (usual exaggerations in trade) are not in themselves fraudulent RULE ON CONTRACTS ENTERED INTO BY QuickTime and a MINORS TIFF (Uncompressed) decompressor are needed to see this picture. GENERAL RULE : VOIDABLE EXCEPTIONS: a. Upon reaching age of majority they ratify the same b. They were entered unto by a guardian and the court having jurisdiction had approved the same
Based upon public policy and morality Contracts are void entered into
CAUSES WHICH VITIATE FREEDOM 1. Violence REQUISITES a. Irresistible physical force b. Such force is the determining cause for giving consent 2. Intimidation REQUISITES: a. Determining cause for the contract b. Threatened act is unjust and unlawful c. Real and serious Page 122 of 297
immediate, direct and most proximate reason why parties enter into contract REQUISITES: 1. It must exist 2. It must be true 3. It must be licit MOTIVE purely private reason; illegality does not invalidate contract except when it predetermines purpose of contract; when merged into one Cause Direct and most proximate reason of a contract Objective and juridical reason of contract Cause us always same for each contracting party Motive or
Indirect reasons
remote
Psychological or purely personal reason The motive differs for each contracting party
NOTE: Legality or illegality of cause affects the existence of validity of the contract; Legality or illegality of motive does not affect the existence or validity of contract
CAUSA IN SOME CONTRACTS: 1. Onerous contracts the prestation of promise of a thing or service by the other 2. Remuneratory contracts the service or benefit remunerated 3. Pure Beneficence mere liberality of the donor or benefactor 4. Accessory identical with cause of principal contract, the loan which it derived its life and existence (ex: mortgage or pledge)
THINGS WHICH CANNOT BE THE OBJECT OF CONTRACT: 1. things which are outside the commerce of men 2. intransmissible rights 3. future inheritance, except in cases expressly authorized by law QuickTime and a 4. services which are contrary to law, morals, good TIFF (Uncompressed) decompressor are needed to see this picture. customs, public order or public policy 5. impossible things or services 6. objects which are not possible of determination as to their kind CAUSA CAUSA
CHAPTER 3. FORM OF CONTRACTS See Arts. 1356 - 1358 FORM in some kind of contracts only as contracts are generally consensual; form is a manner in which a contract is executed or manifested 1. Informal may be entered into whatever form as long as there is consent, object and cause 2. Formal required by law to be in certain specified form such as: donation of real property, stipulation to pay interest, transfer of large cattle, sale of land thru agent, contract of antichresis, contract of partnership, registration of chattel Page 123 of 297
CAUSES/GROUNDS: 1. Mutual: instrument includes something w/c should not be there or omit what should be there a. Mutual b. Mistake of fact c. clear and convincing proof d. causes failure of instrument to express true intention 2. Unilateral a. one party was mistaken b. other either acted fraudulently or inequitably or knew but concealed c. party in good faith may ask for reformation 3. Mistake by 3rd persons due to ignorance, lack of skill, negligence , bad faith of drafter, clerk, typist 4. Others specified by law to avoid frustration of true intent Requisites: a. There is a written instrument b. There is meeting of minds c. True intention not expressed in instrument d. Clear and convincing proof e. Facts put in issue in pleadings NOTE: prescribes in 10 years from date of execution of instrument WHEN REFORMATION NOT AVAILABLE: 1. Simple donation inter vivos 2. Wills 3. When real agreement is void 4. Estoppel when party has brought suit to enforce it
CHAPTER 6. - DEFECTIVE CONTRACTS See Arts. 1370 - 1422 KINDS OF DEFECTIVE CONTRACTS: 1. RESCISSIBLE CONTRACTS Those which have caused a particular economic damage rd either to one of the parties or to a 3 person and which may be set aside even if valid. It may be set aside in whole or in part, to the extent of the damage caused' REQUISITES: a. Contract must be rescissible i. Under art 1381: Contracts entered into by persons exercising fiduciary capacity: Page 124 of 297
CHAPTER 4. REFORMATION OF INSTRUMENTS See Arts. 1359 - 1369 REFORMATION OF CONTRACTS remedy to conform to real intention of parties due to mistake, fraud, inequitable conduct, accident
OBLIGATION CREATED BY THE RESCISSION OF THE CONTRACT: Mutual Restitution a. Things w/c are the objects of the contract and their fruits b. Price with interest MUTUAL RESTITUTION NOT APPLICABLE WHEN a. creditor did not receive anything from contract b. thing already in possession of party in good faith; subject to indemnity only; if there are 2 st or more alienations liability of 1 infractor BADGES OF FRAUD QuickTime and a TIFF (Uncompressed) a. consideration of decompressor the conveyance is are needed to see this picture. inadequate or fictitious b. transfer was made by a debtor after a suit has been begun and while it is pending against him c. sale upon credit by an insolvent debtor d. evidence of indebtedness or complete insolvency
2. VOIDABLE CONTRACTS intrinsic defect; valid until annulled; defect is due to vice of consent or legal incapacity CHARACTERISTICS: a. Effective until set aside b. May be assailed or attacked only in an action for that purpose c. Can be confirmed ( NOTE: confirmation is the proper term for curing the defect of a voidable contract) d. Can be assailed only by the party whose consent was defective or his heirs or assigns WHAT CONTRACTS ARE VOIDABLE: a. Minors ( below 18 ) b. Insane unless acted in lucid interval c. Deaf mute who cant read or write d. Persons specially disqualified: interdiction e. In state of drunkenness f. In state of hypnotic spell Page 125 of 297
civil
CAUSES OF EXTINCTION OF ACTION TO ANNUL a. PRESCRIPTION - Period to bring an action for Annulment i. Intimidation, violence, undue influence 4 years from time defect of consent ceases ii. Mistake, fraud 4 years from time of discovery iii. Incapacity - From time guardianship ceases Carantes vs. CA, 76 SCRA 514, discovery of fraud must be reckoned to have taken place from the time the document was registered in the office of the register of deeds. Registration constitutes constructive notice to the whole world b. RATIFICATION REQUISITES i. knowledge of reason rendering contract voidable ii. such reason must have ceased, except in case of ratification effected by the guardian to contracts entered into by an incapacitated, iii. the injured party must have executed an act which expressly or impliedly conveys an intention to waive his right c. LOSS OF THE THING which is the object of the contract through fraud or fault of the person who is entitled to annul the contract NOTE: Object is lost through a fortuitous event, the contract can still be annulled, but the person obliged to return the same can be held liable only for the value of the thing at the time of the loss, but without interest thereon. Ratification cleanses the contract of its defects from the moment it was constituted. 3. UNENFORCEABLE CONTRACT valid but cannot compel its execution unless ratified; Page 126 of 297
a. No action for specific performance h. No action for restitution on either side. The law will leave you where you are i. Both shall be prosecuted j. Thing/price to be confiscated in favor of government a. No action for specific performance b. Innocent party is entitled to restitution c. Guilty party is not entitled to restitution d. Guilty party will be prosecuted e. Instrument of crime will be confiscated in favor of govt.
a. No action for specific performance b. No action for restitution on either side. The law will leave you where you are c. No confiscation
a. No action for specific performance b. Innocent party is entitled to restitution c. Guilty party is not entitled to restitution
KINDS OF ILLEGAL CONTRACTS PARI DELICTO DOCTRINE Both parties are guilty, no action against each other; those who come in equity must come with clean hands; applies only to illegal contracts and not to inexistent contracts; does not apply when a QuickTime and a superior public policy intervenes TIFF (Uncompressed) decompressor needed to see this picture. EXCEPTION are TO PARI DELICTO RULE - If purpose has not yet been accomplished and If damage has not been caused to any 3rd person OTHER EXCEPTIONS: a. Payment of Usurious interest b. payment of money or delivery of property for an illegal purpose, where the party who paid or delivered repudiates the contract before
LACHES Concerned with effect of delay Question of inequity of permitting the claim to be enforced Not statutory Applies in equity Not based on a fixed time
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